Amazon's in the perfect position to give loans to their sellers. They have all the data in the world about how a seller is doing on the platform, so why not make some (relatively) safe money off interest and boosted sales?

Loaning money to their merchants allows their merchants to buy more inventory to ship to Amazon to sell. Thus Amazon benefits by making more sales, too.

It's crazy really, they loan the money they would in the past have to use to buy stock, but they also don't have to pay for warehousing (straight away).

Presumably it helps with inventory management too - like the loanee indicates the inventory they're buying which means Amazon can factor that in.

Then they charge interest ...

However, whilst this sounds good for Amazon, is it more efficient - in economic terms - or does it just reduce Amazon's risks and costs.

And the best part is that because they can hold money from sales for months, before remitting it to a merchant, they can loan that money right out to other merchants.

Huh?

In the vast majority of cases money is released within 2 weeks of a sale. The exceptions are if an account gets suspended, or if there's a sudden increase in sales and it's flagged, in which case they might hold it for another week or two.

The only time money is held for over a month is if the account was suspended and not reinstated by then.

Some sellers even get settlements weekly or more frequently. I'm not sure how, but I know it was at least possible sometime in the past.

Two weeks still sounds like a considerable float to lend from.

They have a bank backing the loans anyway, it's not their own cash.

Square does the same thing. If you control the flow of money to the merchant you’re in a great place for both risk assessment and ensuring that you get paid back.

As does Shopify.

Quickbooks too!

Quickbooks? Really? I'd think they are more of a merchant service compared to merchant financing...

And Paypal!

and Stripe.

They have an offer on my dashboard that's 10% interest for 3x monthly subscriptions (not total monthly revenue), 20% interest for 6x. To me, it seems rather aggressive. I'd have to be super desperate to accept those terms.

Almost every processor gives out loans to small businesses. Most small businesses struggle with cash flow, so these loans are with very high interest rate. 20% etc. It's a very nice money making machine. Before they pay the merchant, they collect the interest and part of the payment from their daily transactions.